A model to solve the housing crisis for ‘generation rent’?

Policy Network, a London-based progressive think tank, hosted a breakfast briefing on 26 April to launch a paper proposing a new model of home occupation to solve the capital’s housing crisis. With house prices rapidly rising across London, and rent increases outstripping inflation and wage increases, those around the table at the event described London as becoming ‘hollowed out’ as all but the wealthiest residents are pushed to the cities margins and beyond. All at the event agreed that the current price rises in the housing market pose a threat to jobs and the economy of London, whilst also affecting diversity and community cohesion. All of those on the panel and around the table were clear that something should be done to address this. The paper presented ‘co-owned, co-operative housing’ as this solution.

‘Co-owned, co-operative housing’ was presented by the paper’s author, Jake Sumner, as a vital reform to the private rented sector (PRS). The gulf between social housing, provided by local authorities and housing associations to those in most need, and home ownership, is vast and growing. Those on lower to middle incomes (given by the paper as £20,000 – £60,000) are not eligible for social housing and for many house purchase is out of reach. The private rented sector is often the only option therefore, but this is seen as unattractive due to limited rights for tenants, expensive and insecure tenancies and often poor quality accommodation. Renting is perceived negatively as a necessity rather than a choice, unlike in other Western European countries such as Germany and Switzerland, where levels of renting are higher and longer-term.

So how, in a time of continuing house price rises when private renting is likely to continue to be the only option for a growing number of people, can private renting be reformed to make this a viable and attractive alternative to home ownership and a positive choice for tenants? Under the new model proposed in the paper, rather than selling land for a one-off payment to developers who then realise profits through development gain, local authorities and other public sector bodies (such as Transport for London and the NHS) would retain the land and the benefits of the development that they commission. The public authority would retain the freehold on the development and collect rent from the tenants. Co-operative enterprises would be created to manage the properties and would own the leasehold. Tenants would become members of the co-operative and would have a stake in their housing (e.g. through buying shares in the co-operative and selling their stake when they leave). Leases would be lifetime or very long-term, whilst rents would be linked to income or to the lowest market rents in an area.

Proposals for funding the new housing model include housing bonds, pension funds and private investment vehicles. The co-owned, co-operative housing developments, with long-term assured rents through long-term tenancies, would offer stable assets to invest in. The rents from schemes could be re-invested by public authorities into further co-owned, co-operative housing schemes, or used to compensate for Government cuts to local government budgets across a range of other service areas.

Finally, Jake Sumner presented co-owned, co-operative housing as offering a significant opportunity to drive up the standards of the design of new housing, creating attractive homes that people want to live in, whilst boosting innovation in energy saving measures and investment in skilled apprenticeships:

“The benefits are considerable…There could be quality design, high standards, beautiful buildings, environmental space and desirable housing to transform London’s housing and build for the long term which stands the test of time….There could be savings in energy and water, energy efficiency (such as delivering Passivhaus standard), green design such as green walls, community energy and renewables built in, green space and highest level digital infrastructure.” (p14)

Around the table at the breakfast briefing there was support for the model outlined in the paper and by Jake Sumner in discussion. There was enthusiasm for the opportunity that the new model presents for London to be a leader in addressing its liveability crisis, with other cities around the world facing similar challenges. Growth in PRS schemes was supported as a means to address issues of affordability, liveability and therefore potential adverse effects on the city’s jobs and growth. The local government representatives highlighted particular concerns on the part of headteachers who were increasingly worried about being able to staff schools in London due to teaching staff not being able to afford to live nearby.

Local government attendees agreed to consider the recommendations outlined in the Policy Network paper seriously. Overall however those at the event were clear that the new Mayor of London, following elections on 5th May, had to take a more interventionist approach than previous holders of the office. A London-wide approach was necessary, they said, bringing Boroughs together to share their approaches to PRS schemes and making attempts to ‘scale up’ what had been shown to work well. Those around the table expressed concerns that despite Mayoral candidates agreeing that 50,000 new homes a year had to be delivered, they were unclear about how to manage this in practice. Making use of land in public ownership in creative ways, as with the co-owned, co-operative model, and quickly, would be important. Policy-makers must recognise too that owner occupation is not a viable solution to London’s housing crisis; innovation in the private rented sector is a significant part of addressing the challenge.

The RGS-IBG is organising a public discussion meeting on private rental- ‘Life off the Ladder’ – on 15 June; the latest in our series of 21st Century Challenges events. Find out more and book tickets.